Pace of Georgia bank failures expected to rise

Walt Moeling, a banking attorney with Bryan Cave in Atlanta, expects two to four failures per month through the end of the year.

“If the economy remains stable, it’s one answer,” he said. “If it slumps ... borrowers are going to give up [paying their loans] quickly, and that will boost the number.”

Thirty-nine banks have failed in Georgia since August 2008, tops in the nation. But Florida and Illinois are creeping up and rank first and second, respectively, for 2010.

The Federal Deposit Insurance Corp. has said 2010 will be the peak year nationwide, with the number of forced closures tapering off next year.

The pickup in the economy seen in the first half of the year helped wounded Georgia banks buy time. Some got better deals selling foreclosed real estate, helping them preserve precious capital, and fewer borrowers defaulted.

Don Coker, a bank consultant from Woodstock, expects the number to remain flat. Closing banks is costly and time-consuming to the FDIC, and the regulator “wants to give troubled institutions and the investor market every opportunity to correct problems so that the FDIC won't have to deal with them.”

Georgia has 66 banks with a Texas Ratio of more than 100. The ratio compares a bank’s problem loans with the amount of capital it has on hand to absorb them. A score approaching 100 means problems are exceeding the bank’s ability to absorb the loans.

At least 31 banks top 200, said Adam Aspes, an institutional equity trader with Sterne Agee & Leach. He predicts 16 to 20 banks will fall through the end of the year.

“The FDIC operates like the PGA Tour,” Aspes said. “They are due for a swing through the state of Georgia where you probably get eight to 10 failures in a two to three week stretch in the fall and then again before year's end.”